Integrating Energy Efficiency into Mortgage Financing: Promising Efforts in the New York City Multifamily Building Sector

Author(s): Sam Marks, Vice President, Deutsche Bank

When McKinsey & Company first released its global cost curve for greenhouse gas abatement in 2007, proponents of energy-efficient retrofits of buildings rejoiced. Here was a respected analytical framework that supported what they understood intuitively: that simple, tried-and-true measures associated with building retrofits could be implemented at net-present value “negative cost.” In other words, using relatively mundane technologies (such as insulation, air sealing, efficient boilers) would not only reduce carbon emissions but would pay for themselves in savings over time. At least one aspect of the massive greenhouse gas reduction challenge appeared to be easy low-hanging fruit. Unfortunately, this fruit has not been as low-hanging as policy wonks once thought. Market demand has yet to propel energy efficiency into the mainstream, and the reasons for its limited uptake are as myriad as the types of buildings that make up the potential retrofit marketplace. From the vantage point of Deutsche Bank’s community development activities, we see some promising initiatives that treat energy efficiency upgrades not as a separate, stand-alone transaction, but as a component in existing transactional frameworks, namely the multifamily mortgage refinancing process.